Asda, the British retail chain owned by Wal-Mart Stores, Inc. (NYSE: WMT), has agreed to purchase the 193 UK stores of Denmark’s Netto for $1.2 billion. The move is a first for both Asda and Walmart into the small footprint space that UK shoppers appear to prefer. An average Asda store has around 46,000 square feet of space, while the Netto stores have an average of just 8,000 square feet. Retail rival Target Corp. (NYSE: TGT) is watching closely.

Asda’s CFO said that the company has been seeking to create a supermarket division for some time, and that the Netto purchase fits in with that strategy. She also noted that, “[t]here is no doubt about it that customers sometimes prefer to do their shopping in smaller stores.”

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The acquisition may be a bit late though, because Asda’s main competitors, Tesco and Sainsbury, have been adding these small supermarkets for several years now and may have cornered all the best locations in the center of towns and high-density residential areas. The stores, like Asda, are following shoppers who are either aging or living in small households and who would rather walk to a small store more frequently than pile into the car and drive to a huge supercenter to stock up on bulk items.

Meeting the demands of this type of shopper has also got to be on Walmart’s radar in the US. The world’s largest retailer has had poor success trying to open superstores in major American cities.

Walmart has succeeded in launching its Supermercado de Walmart stores in Phoenix and Houston, but has been unable to expand the concept to other US cities. If Asda can successfully integrate the Netto stores into its UK operations, Walmart is likely to try to duplicate that success in the US.

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The move to smaller stores in bigger US markets is important to Walmart because its US sales have stalled somewhat. If the retailer could tap consumers in the big population areas at a reasonable cost, US sales growth could certainly get better.

Walmart earnings recently beat forecasts, thanks in part to strong international sales. Rival Target Corp. (TGT) also posted strong earnings. Specifically, Target earnings on strong sales as consumer spending rebounded.WMT stock shares are up less than 1% this morning.

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